2024 (7) TMI 277 - AT - Income Tax

Addition u/s 68 - unsecured loans and capital introduced by the assessee - cash deposit out of cash sales during demonetisation - HELD THAT - From examination of record in light of rival contention it is crystal clear that CIT(A) confirmed addition from Smt Sanjesh and Shree Ratan Agro Industries. AO failed to make inquiries regarding the above. So the addition is unsustainable. Addition u/s 68 on account of capital introduced by the assessee during the year out of business of sale purchase of jewellery in his proprietary concern M/s. Balsons Jewellers - Assessee claimed to have consideration from the sale of ornaments which was duly declared in the return of income and was taxable capital gain on account of indexed cost apart from balance amount from the past saving. It is a fact that appellant assessee is a proprietorship firm having introduced total capital. Resultantly the findings of the CIT(A) are not just fair, reasonable and deserves to be set aside. Consequently the appeal of the assessee deserves to be allowed. The creditworthiness was proved and cash deposit out of business receipts as trader cannot be concluded that appellant has given the same to the lenders. Regarding payment by Shri Satyanarayan Gupta regarding cheque received on 6.10.2016 and amount returned on 6.11.2017 by assessee through banking transaction. Rs. 2,03,87,482/- was deleted by the CIT(A). Assessee had submitted documents regarding purchase bills, confirmation, ITR of seller, sales and purchase bills. No bill was above Rs. 2 lacs, in October 2016, Mahanavmi, Vijaydashmi, Dhan Teras and Deepawali festivals. See Agson Global (P.) Ltd. 2022 (1) TMI 848 - DELHI HIGH COURT As well settled principle of law the findings of CIT(A) deleting the amount deserved to be upheld. Addition on account of capital introduced the assessee had filed copy of cash book, copy of sales book along with sales bill, copy of purchase book along with purchase bills, copy of expenses ledger, copy of confirmation of loans outstanding and copy of stock register for the period 1.4.2016 to 31.3.2017. Appeal of the assessee is allowed and appeal of the revenue is dismissed.

Summary

Issues:
- Addition of unexplained cash deposit during demonetisation
- Addition of unexplained capital
- Difference in stock valuation
- Appeal against assessment order
- Confirmation of unsecured loans
- Capital introduced by the assessee
- Deletion of additions on various grounds

Analysis:

The case involved appeals by both the Assessee and the Revenue Department against an order dated 14.12.2022 of the Learned Commissioner of Income Tax (Appeals) arising from an assessment order dated 31.12.2019. The Assessee had filed a return of income for assessment year 2017-18, which was selected for scrutiny. The Assessing Officer made additions on account of unexplained cash deposit during demonetisation, unexplained capital, and difference in stock valuation. The Assessee appealed before the Learned CIT(A), who partly allowed the appeal.

The Assessee raised grounds against the addition of unsecured loans and capital introduced during the year. The Revenue Department challenged the deletion of various additions made by the Assessing Officer. Both the Assessee and the Revenue Department preferred appeals against the decision of the Learned CIT(A).

The Authorized Representative for the Assessee argued that the additions were made without proper verification and solely based on suspicion. The Assessee provided documents to support the genuineness of transactions, including loan confirmations and repayment details. The representative contended that the additions were unjustified and should be deleted.

On the other hand, the Representative for the Revenue Department argued that the Assessee failed to prove the genuineness and creditworthiness of certain transactions. However, the Learned CIT(A) found in favor of the Assessee on several grounds, deleting the additions made by the Assessing Officer.

After considering the arguments and examining the record, it was concluded that the Assessee had provided sufficient evidence to support the transactions in question. The findings of the Learned CIT(A) were upheld, and the appeal of the Assessee was allowed, while the appeal of the Revenue Department was dismissed.

In the final judgment pronounced on 2nd July 2024, the Tribunal ruled in favor of the Assessee, highlighting the importance of providing documentary evidence to substantiate financial transactions and capital introductions.